Jakarta. The weakening rupiah, which fell beyond Rp 17,500 against the US dollar on Tuesday, is beginning to affect Indonesia’s business sector, prompting companies to delay expansion plans and adopt more cautious financial strategies, according to a leading business association.

Shinta Kamdani, chairwoman of the Indonesian Employers Association (Apindo), said the currency depreciation has become a serious burden for domestic industries, particularly those heavily dependent on imported raw materials.

Around 70% of manufacturing raw materials in Indonesia are still imported, while raw materials account for roughly 55% of total production costs, she said.

“As a result, every depreciation in the rupiah is immediately reflected in higher input costs in rupiah terms,” Shinta said on Tuesday.

Industries most affected include petrochemicals, plastics, food and beverages, pharmaceuticals, and manufacturing.

Shinta cited rising naphtha prices -- a key feedstock for the plastics industry -- as an example, saying they had pushed resin prices up by tens of percent. The impact has spread to packaging producers and other downstream industries.

Beyond higher production costs, the stronger US dollar has also increased the burden on companies carrying foreign currency debt, including interest payments and principal repayments.

At the same time, businesses are struggling to raise selling prices because consumer purchasing power remains weak.

“Part of the cost pressure must be absorbed by businesses themselves. This then squeezes margins and affects decisions on expansion and employment,” Shinta said.

In response to the pressure, companies have begun adopting more prudent business strategies. One of the main approaches is selective growth -- continuing expansion only in carefully chosen areas while taking market demand, cost efficiency, and investment returns into account, she said.

Meanwhile, speculative investments or projects highly dependent on external conditions are increasingly being postponed.

Many companies are also strengthening risk management by increasing the use of currency hedging instruments to protect against rupiah volatility. Businesses are additionally restructuring debt portfolios to achieve a more balanced mix between rupiah and foreign-currency liabilities.

Operationally, many firms are focusing on efficiency measures, reducing capital expenditure, and diversifying imported raw material suppliers, although domestic supply capacity remains limited in many sectors, she added.

“There is still room for adaptation, but it is not fully sufficient to offset the scale of the current external pressures,” Shinta said.

Apindo believes the current pressure on the rupiah is being driven not only by domestic factors, but also by global dynamics, including rising US Treasury yields and escalating geopolitical tensions in the Middle East, which have encouraged capital flows into dollar-denominated assets.

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